ReNew Jersey Business Summit
New Jersey’s got a lot going for it, including easy access to the nation’s largest markets, a great education system and a diverse population. But will the state’s high tax burdens derail efforts to improve economic activity here? Some participants on the Chamber Business Summit’s “Taxes and Incentives” panel shared their thoughts with NJBIZ.
“The New Jersey Society of CPAs and its members have been saying for years that the tax climate and business environment in New Jersey is a deterrent to those looking to start or grow a business,” warned NJCPA Chief Executive Officer and Executive Director Ralph Thomas. “Reducing the cost of doing business in New Jersey would make the state more competitive compared to surrounding states, and it would also bring more jobs and reduce costs to consumers.”
These kinds of issues are keeping people from starting or building a business in New Jersey, and “they are even causing people to relocate to other states,” he said. “More than 53% of NJCPA members surveyed last May said they have advised a New Jersey-based business client to consider relations due to the state’s high cost of doing business. And 70% of the respondents said they have advised an individual client to consider relocation due to the high cost of living.”
In preparation for the Chamber Summit, the NJCPA polled members about their suggested solutions. The top three, according to Thomas, were: Implementing tax incentives for small and midsize businesses, reducing the gross income tax rate across the board, and reducing the corporate business tax rate.
But there’s more. “According to our members, there’s so also much red tape in New Jersey that it is very challenging to run a small business; the administrative costs are prohibitive. Projects sitting unapproved have a carrying cost for the business. Approvals must be done more quickly,” he added. “Because of their larger staff and resources, bigger businesses are able to deal with state regulations and red tape better than small and midsize companies, which gives them an unfair advantage. The NJCPA and its members also continue to advocate for consolidation of services among neighboring towns to cut costs; meaningful reforms to the public worker pension system; and improvements to the state’s infrastructure to help the flow of goods and services and enable employees to more easily and safely travel to work.”
Thomas and team also surveyed members about Gov. Phil Murphy’s $48.9 billion proposed budget for the 2023 fiscal year. “Nearly 55% of respondents said that the pro-posed budget will leave the state’s economy either marginally worse or significantly worse over the long term,” he said. “The survey showed that most respondents believed he should have focused more on an overhaul of the public worker pension system, reducing the size of New Jersey’s municipalities and school districts through shared services, and permanent relief of real estate tax burdens as opposed to rebates.”
NJCPA members also weighed in about what Murphy should do with the unspent federal pandemic-relief funding that the administration received. “Respondents said the highest priority should be investing in infrastructure improvements,” according to Thomas. “That was followed by immediate relief to homeowners and tenants and replenishing the Unemployment Insurance Trust Fund.”
Consider the competition
Sills Cummis & Gross Member Ted Zangari, who will also sit on the Taxes and Incentives panel, pointed out that, “To attract and retain businesses in the modern era, New Jersey needs to remain competitive with our neighboring states in the region. We can’t afford huge incentive packages to compete with sunbelt or midwestern states, so if the lowest cost state wins the day that’s OK — we’ll get our fair share of companies willing to accept a more modest incentives package that requires the company to pay a slight premium to locate in New Jersey, because that company see the virtues of doing business here.”
But to get to that point, “We may need to recalibrate the ‘Emerge’ incentive program, especially to reflect the work from home dynamic and other realities of a post-pandemic world,” he cautioned. “The best suggestion is quite simple: New Jersey policymakers should strive to keep and reduce all of the state’s tax rates — for businesses and individuals—at or below the tax rates of states all around us. And if we can manage it fiscally, to really break-out from the regional pack, we should strive to eliminate certain taxes, ideally the corporate business tax, and to put certainty around other taxes by use of automatic, formulaic increases and automatic sunsets.”
Early in his years as mayor of New York City, “Mike Bloomberg told New Yorkers that the higher cost of living in the region was a fact of life, that they should be resigned to having to pay a premium for living and working in one of the world’s great metropolises,” concluded Zangari. “He’s right—except that we cannot allow that premium to become a super-premium because that’s the tipping point at which many more people and businesses will migrate away from the region.”
More from our ReNew Jersey Business Summit Preview: